Cooper Industries agrees to pay up to $630M in asbestos settlement

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Cooper Industries Ltd., the maker of Crescent wrenches and Halo lamps, agreed to pay up to $630 million to settle an asbestos lawsuit related to its former Abex brake unit, which it sold to the now-bankrupt Federal Mogul Corp. Houston-based Cooper Industries agreed to pay $130 million, with $100 million payable on Federal Mogul’s emergence from bankruptcy protection. The remainder will be paid in two installments of $15 million on Jan. 15, 2006, and Jan. 15, 2007, Cooper Industries said in a release. Cooper Industries also agreed to make 25 annual payments of as much as $20 million each, depending on the sums a Federal Mogul asbestos settlement trust gets from insurance, Cooper Industries said. “We will have certainty and finality on the Abex liability and can focus management resources on executing our strategic plan,” said Kirk Hachigian, Cooper Industries’ chief executive officer, in a statement. Since 1982, 77 companies have cited asbestos lawsuits when filing for Chapter 11 protection, including Federal Mogul. The agreement means Federal Mogul is a step closer to exiting bankruptcy. The settlement will resolve more than 38,000 pending claims against Abex, Cooper Industries said. Cooper Industries is responsible for the Abex brakes claims even though it sold the brake unit to Federal Mogul in 1998. Federal Mogul canceled an agreement to indemnify the Abex claims after seeking bankruptcy protection in Wilmington, Del., in 2001. Lung disease The agreement must be approved by a judge. Cooper Industries will be protected against further claims by an injunction to be issued by the district court when the plan is confirmed, the company said. The plaintiffs in the brake cases are often workers who claim they inhaled asbestos while working on the brakes and contracted lung disease. Friction, such as from sanding, can release the asbestos into the air, the suits say. Asbestos is a combination of fibrous, flame-retardant minerals linked to lung disease, lung scarring and mesothelioma, a rare form of cancer. Cooper Industries also agreed to give Federal Mogul’s asbestos settlement trust 1.4 million shares of Cooper stock when Federal Mogul exits bankruptcy. In the first year the trust may sell the shares back to Cooper at market prices. Cooper Industries shares rose $2.96 to $74.96 in New York Stock Exchange composite trading Friday. Cooper Industries expects to take an after-tax charge of $150 million to $225 million in the fourth quarter, the company said.